So how can you figure out what’s right for you? Start by calculating how much cash in hand you’ll realistically have at the end of the month.
Your rent budget should be contingent upon your financial goals and the amount of money you’ll have after taxes and fixed expenses, something we like to call cash in hand. The amount you’ll pay for a one-bedroom in the hustle-and-bustle of NYC may have you living like a king in a more affordable place like Portland, Oregon.Īll this begs the question: if not 30%, how much of your income should you budget on rent? Nor does the rule consider the variable costs of living. The rule doesn’t consider permanent expenses and other financial obligations you may have like student debt or car loans. Your financial situation is unique, and what works for someone else won’t necessarily work for you. While 30% may feel like a good rule of thumb, it’s by no means a hard and fast standard. Over the decades, 30% became the yardstick for spending on rent, regardless of economic downturns, changes in purchasing power, or national increases in personal debt rendering it a relatively arbitrary figure. Long story short, the 30% mark has its roots in the National Housing Act of 1937. A quick Google search will reveal a long list of sources telling you to only put down between 25% to 30% of your income on rent. The big question surrounding apartment expenses is: How much of your income should you spend on rent?Īsk a traditional financial advisor, and they’ll probably tell you that 30% of your gross income is how much you should spend (gross income is the amount of money you make before deductions like state and federal taxes).Īnd they’re not the only ones. Which is why properly creating a first apartment budget is so important.Ĭalculating exactly how much you can spend on rent will allow you to begin saving money for your financial goals instead of living paycheck-to-paycheck. The takeaway? Your salary is unlikely to keep up with the increasing cost of rent. Plus, the cost of living is increasing at its fastest rate since 2008 while wages are remaining stagnant. Signing an apartment you can’t afford is risky, but it’s more common than you think: A recent study at Harvard showed that 1 in 4 people are paying more than 50% of their income on rent and utilities. Moving into your first apartment means a lot in terms of independence as well as responsibility, especially financial responsibility. What other rental costs you need to consider.Why you should budget in the first place.
BILLS TO PAY WHEN RENTING AN APARTMENT PRO
That’s why we’ve compiled this complete guide to manage the financial burden of moving into your first apartment.įollow our lead to manage your apartment expenses like a pro and never see your account reach $0 again. We all know that scary feeling at the end of the month when your account hovers dangerously close to $0 and those dreaded overdraft fees loom large. Whether you’re moving out of your parents’ place, leaving campus housing, or simply going out on your own for the first time, signing the lease on your first place is an exciting milestone.īut all that excitement can quickly go out the window when you realize you need to start budgeting for your rent, utilities, food, and so much more. Freeeeeedom! That’s probably the thought echoing in your head if you’re about to move into your first apartment.
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